Paul Tudor Jones says recession is coming and stocks could drop another 10%
Famed investor Paul Tudor Jones believes the U.S. economy could already be in a recession amid the Fed's aggressive tightening cycle.
The founder and chief investment officer of Tudor Investment said there is a specific recession playbook to follow for investors navigating the treacherous waters, and history shows that risk assets have more room to fall before hitting a bottom.
"Most recessions last about 300 days from the commencement of it," Jones said. "The stock market is down, say, 10%. The first thing that will happen is short rates will stop going up and start going down before the stock market actually bottoms."
— Yun Li
Apple's iPad results could return to pre-pandemic levels next year, Bank of America says
After remote school and work during the Covid pandemic created a surge in demand for iPads, Apple is likely to see year over year declines in iPad shipments for 2022 and 2023, according to Bank of America.
Analyst Wamsi Mohan said in a note to clients on Monday that iPad sales could fall to pre-pandemic levels next year.
"Although the device continues to attract a high proportion of new users (~50% of purchasers in any qtr. even pre-pandemic were new to the device), replacement rates remain muted. We see this as a function of the category being in structural decline," the note said.
On the bright side, Apple could see a rebound in 2024 as iPads purchased early in the pandemic are due for an upgrade, Mohan said.
Shares of Apple were down 0.7% in morning trading. Bank of America has a neutral rating on the tech stock.
— Jesse Pound
Semiconductor ETFs hit new 52-week lows
A selloff in semiconductor stocks brought two key industry exchange-traded funds to their lowest levels in 52 weeks on Monday.
The slump comes amid a shift in U.S. policy that limits companies from exporting to China.
Both the iShares Semiconductor ETF and the Vaneck Semiconductor ETF fell to their lowest levels since November 2020. Shares of LAM Research, Marvell, KLA and AMAT all down over -4% so far today, dragging the ETFs lower.
-- Carmen Reinicke, Gina Francolla
December wheat futures contracts climb as Russia steps up Ukraine missile attacks
December wheat futures rallied 4.6% Monday morning to a high of $9.245 a bushel (60 pounds of wheat) after Russian missile attacks struck more than 10 cities in Ukraine overnight, raising concern that exports will be hurt.
The Teucrium Wheat Fund is ahead 3.3% premarket while the Invesco DB Agriculture Fund is higher by 1.3%.
December gold and silver contracts were trading at one-week lows, with the VanEck Gold Miners ETF Gold ETF and Global X Silver Miners ETF down between 1.3% and 1.8% in early trading. First Majestic Silver, Harmony Gold and Hecla Mining fell about 2%.
The dollar index is on pace for a fourth straight advance, with the euro falling as low as 0.968 against the dollar.
— Scott Schnipper and Gina Francolla
Dollar strength likely to be key in upcoming earnings
The strength of the U.S. dollar is likely to be an important point coming up in earnings, according to Chris Larkin, managing director of trading at E*Trade from Morgan Stanley.
"The last earnings season of the year is kicking off following a week where—in typical 2022 trading fashion—there was no shortage of eyebrow-raising price moves," Larkin wrote in a Monday note. "Despite pulling back to a two-week low last Tuesday, the US dollar index bounced to end last week up more than 17% for the year, and not too far below its 20-year high."
"We may hear more in the coming weeks on the pressures an exceptionally strong dollar can have on US exports and thus, earnings of US companies, but dollar strength could also play a role in getting the Fed to "back off" from its tightening policy," he added. "Though even if continued dollar strength eventually contributes to the Fed switching from raising rates to cutting them, the timing of such a pivot remains uncertain, and might not change the downward trajectory of corporate earnings."
—Carmen Reinicke
Today's notable analyst calls: Merck, Etsy and more
CNBC Pro subscribers can get the lowdown on the biggest calls of the day coming out of Wall Street.
Calls from Monday and over the weekend that investors are taking note of include:
- Goldman: Etsy's marketplace structure makes it unique shielded from supply and demand changes, making it a buy.
- Guggenheim: Merck earns back its buy rating through growing key product sales and positive movement on trials.
- Goldman: Kraft Heinz was upgraded to buy, while Procter & Gamble downgraded to neutral, as retail companies feel impacts of foreign exchange unevenly.
- UBS: Ford and General Motors were both downgraded as cars become less attractive to squeezed consumers.
Read the highlights here.
— Alex Harring
Used car prices see first annual decline in more than two years
Used vehicle prices, a key driver of inflation over the past year or so, could be showing signs of letting up.
Prices in September dropped 0.1% from a year ago, according to the Manheim Used Vehicle Value Index. That's the first negative 12-month reading for the index since May 2020 and indication that a sector that had been heavily impacted by pandemic-related spending could be seeing some relief.
In the summer of 2021, for instance, used vehicle prices had been rising at a pace of more than 10% a month. A dearth of new vehicles had pushed buyers into the used market, sending prices skyrocketing.
However, in recent months, prices have receded. The Bureau of Labor Statistics, for instance, reported a 0.1% month-over-month decline in August.
Markets will get a look at fresh inflation figures Thursday when the BLS releases September's consumer price index. Economists surveyed by Dow Jones expect headline CPI to show a 0.3% monthly increase and an 8.1% annual gain.
—Jeff Cox
Fed unlikely to pivot soon, El-Erian says
The Federal Reserve is probably not anywhere near a pivot from raising interest rates to cutting them, according to Mohamed El-Erian, chief economic adviser of Allianz.
"Can they stop, can they pivot? No they cannot," El-Erian said on CNBC's Squawk Box Monday morning. "They cannot because the data does not give them enough of a green light, but importantly their credibility has been hit very hard."
He added that because of this, it's likely that the Fed will overtighten and lead to a U.S. recession.
"They've gotten themselves into this hole and unfortunately they don't know how to get out of this hole," he said. "There's no ladder out of this hole."
—Carmen Reinicke
Bond market closed for Columbus Day
Monday could see light volume with many Wall Street traders off for Columbus Day. The U.S. stock market is open Monday, but the bond market is closed.
On last year's Columbus Day, the SPDR S&P 500 Trust traded about 65 million times. That is lower than any day in September or October of this year.
While lower volume can sometimes make for a sleepy trading day, it could also contribute to outsized stock moves, as the market could be more susceptible to news events that drive knee-jerk reactions.
— Jesse Pound
Rivian shares shed 10% after company recalls nearly all of its vehicles
Rivian Automotive shares dropped nearly 10% in premarket trading after the EV startup said it will recall nearly all of its vehicles due to a possible issue of a loose fastener that could make a driver lose steering control.
In May, Rivian recalled electric pickup trucks in the United States because airbags may not deactivate when a child is in the front passenger seat. The stock has lost 67% this year as rising rates hit growth names particularly hard.
— Yun Li
Multiple explosions hit Kyiv, Ukraine's capital, in latest escalation of war
Multiple large explosions hit Ukraine's capital Kyiv on Monday, killing and injuring people, the city's emergency services said. The attacks come just days after a blast destroyed part of Russia's Kerch Bridge, the only bridge that links Russia to the Crimean peninsula. Moscow illegally annexed Crimea in 2014.
Russian President Vladimir Putin called the blast at the Kerch Bridge a "terrorist attack." Kyiv has not directly taken responsibility for the explosion.
The strikes are the latest escalation of conflict between Russia and Ukraine.
Read more on CNBC's live blog of the situation.
—Carmen Reinicke
Bank of England announces liquidity measures to help ease pension fund issues
The Bank of England is set to introduce further liquidity measures as it seeks to ensure financial stability in the U.K.
It comes after the central bank on Sep. 28 announced a two-week emergency two-week purchase program for long-dated U.K. government bonds. It was designed to protect liability driven investment (LDI) funds from imminent collapse.
Now, the BOE has announced further measures to ensure an "orderly end" to its purchase scheme on Oct. 14, including increasing the size of its daily auctions to allow headroom for gilt purchases ahead of Friday's deadline.
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— Elliot Smith
European markets continue sell-off, tracking global negativity
European markets retreated on Monday morning, tracking negative global sentiment as investors bet that last week's U.S. jobs data will keep the Federal Reserve on an aggressive path of interest rate hikes.
The pan-European Stoxx 600 fell 0.4% in early trade, with utilities shedding 1.2% to lead losses as most sectors and major bourses slid into the red.
- Elliot Smith
CNBC Pro: Goldman says these 'cheap' global stocks are set to win in the short and long-term
As Europe struggles with soaring electricity and gas bills, Goldman Sachs says global companies focussing on energy efficiency are set to outperform.
"We think Energy Efficiency companies can outperform over the short term, with the focus on energy efficiency to tackle the current energy crisis that followed the Russian invasion of Ukraine," the analysts wrote in a note on Oct. 3.
"[And] over the long term, with the focus on energy efficiency to tackle the climate change and reach the ambitious 'net zero' targets."
CNBC Pro subscribers can read more here.
— Weizhen Tan
Services activity in China contracted in September, private survey shows
The Caixin services purchasing managers' index came in at 49.3 in September, according to a report published Saturday, a steep drop from 55 in August.
The 50-point mark separates growth from contraction. PMI readings compare activity from month to month.
The nation's Covid curbs caused services activity in China to contract in September for the first time since May, the report said.
"Companies that reported reduced activity frequently commented that the pandemic and subsequent measures to contain the virus had restricted operations and weighed on demand in September," the press release by Caixin said.
— Abigail Ng
Core inflation will rise again, Allianz's El-Erian predicts
Allianz Chief Economic Adviser Mohamed El-Erian predicts core inflation will continue rising while headline inflation comes down to about 8%.
He told CBS' "Face The Nation" on Sunday that inflation core inflation will eventually come down. But he expects new Consumer Price Index data coming Thursday to show it rose again month over month.
Core inflation previously rose 0.6% from July to August – the most recent data before what is coming next week – and was up 6.3% from a year ago.
"The question is, does it come down with a slowdown in the economy or a major recession?" he said.
— Alex Harring, Ashley Capoot
The week ahead: Earnings season kicks off, new data and more
Market observers will be watching for key data and information coming in the coming week.
Four of the world's largest banks, as well as consumer interest brands like PepsiCo and Domino's, will report earnings for a week many call the start to the new earnings season.
They will also watch for Consumer Price Index data Thursday morning as concerns over inflation continue to impact the political landscape and economic policy.
New data from the University of Michigan's Consumer Sentiment Index will drop Friday morning. This index gauges consumer feelings about issues such as the health of the business world and their finances and is considered a key indicator of how average Americans feel about the economy.
CNBC Pro subscribers can see more to watch for here.
— Alex Harring, Jesse Pound
Stock futures open lower
Stock futures were down at the start of after-hours trading Sunday night.
Futures connected to the Dow Jones Industrial Average shed 0.3% to 29,225 points.
Both the S&P 500 and Nasdaq 100 saw futures down 0.4% to 3,638 points and 11,056.75 points, respectively.
— Alex Harring
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Nasdaq falls to 2-year low on Monday, led by a decline in chip stocks - CNBC
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